Eurozone finance ministers failed at an emergency meeting yesterday to strike a deal to unblock bailout funds needed to keep Greece from bankruptcy and said they would try again next week.
The Eurogroup ministers said in a statement at the end of talks that ended in the small hours that no deal had been reached and they would meet again on Monday “for further technical work on some elements of the package.”
The ministers went into the negotiations on Tuesday expressing confidence that a deal would be reached to unblock 31.2 billion euros (US$40 billion) in aid to Greece and resolve a rift with the IMF over how to get the debt-stricken state’s economy back on track.
However, the talks ended nearly 12 hours later with a statement saying only that they had “made progress in identifying a consistent package of credible initiatives aimed at making a further substantial contribution to the sustainability of Greek government debt.”
“It was progress, but we have to do a little bit more,” IMF managing director Christine Lagarde told reporters as she left the meeting.
The euro tumbled in Asia in the wake of the failure. The single currency fell to US$1.2751 and ￥104.30 after hitting highs of US$1.2820 and ￥105.07 before the announcement from Brussels.
A major bone of contention was whether to give Greece, which faces a sixth year in recession, an extra two years until 2022 to arrive at a point where it can raise its own funds.
Luxembourgian Prime Minister Jean-Claude Juncker, who presides over the Eurogroup of finance ministers from the 17 countries that use the single European currency, had called for that option.
However, Lagarde very publicly disagreed in the run-up to the negotiations in Brussels.
“I am a little bit disappointed,” Juncker said after the talks, but he said that he believed “a deal will be possible on Monday” and repeated that he was “impressed” with the reforms Greece had carried out to meet its bailout terms.
“Greece has delivered. Now it’s up to us to deliver,” Juncker said.
The IMF, which along with the European Central Bank and the EU form the troika overseeing the Greek bailout, has argued that if Greek debt is to be sustainable in the long run, it must be reduced to 120 percent of GDP by 2020.
If that target cannot be achieved, the IMF might have to withdraw from efforts to stabilize the Greek economy as it cannot extend more aid to countries if their debt level is classed as unsustainable.
Greece’s debt burden is currently nearly 180 percent of GDP and expected to rise to 190 percent by 2014.
That is about three times the EU’s 60 percent limit and way beyond what the country can support, meaning it must be reduced one way or another.